If a business uses only one type of capital, the calculation of its cost of capital is easy. What Is the Weighted Average Cost of Capital? A company’s weighted average cost of capital is how much it pays for the money it uses to operate, stated as an average. It is also the minimum average rate of return it must earn on its assets to satisfy its investors. In other words, the amount the company pays to operate must approximately equal the rate of return it earns....

For example, let’s say XYZ is trading at $40 and you want to buy a call option with a strike price of $50, and the expiration date is 180 days away. You may have to pay $200 for that contract, in this hypothetical example. If XYZ moves above $50 at any time in the next 180 days, you can exercise the option to buy shares at a discount. If there are only 30 days until the option expires, the same option might cost just $50 because there is less time for XYZ’s price to change to the extent that it makes exercising the option profitable....

TWR might be used when comparing the performance of multiple mutual funds. Fund managers aren’t responsible for the cash flows into and out of the mutual fund. So to include those cash flows in the returns would provide misleading results. This measurement helps calculate returns separate from those cash flows. Alternative name: Geometric mean, geometric averageAbbreviation: TWR, TWRR How Does Time-Weighted Rate of Return Work? TWR calculates the rate of return for multiple sub-periods based on changes in cash flow....

Definition and Examples of TTM TTM allows analysts to measure various performance metrics without waiting for the end of a calendar or fiscal year. Another benefit of reviewing results from the trailing 12 months, rather than the previous annual report, is that you can compare like months with each other—apples to apples, so to speak. This is important in instances where a company’s sales are seasonal. For example, if you’re looking at a small business that makes kites, and its sales usually peak in the spring and fall, potential investors or the company’s owners themselves can run a TTM analysis by comparing the income statements from Nov....

Only the most upscale properties are considered trophy real estate, and they can be very difficult to obtain. Buyers need to be highly motivated and willing to pay a hefty price to purchase trophy real estate. Definition and Example of Trophy Real Estate Trophy real estate is categorized as investment property with a place in the top 2.5% of real estate. Their value is due to uniqueness in location, build, or other features attractive to high-net-worth individuals....

Alternate name: unearned discount For example, if you have a loan payment of $200 due on the first of the month and $125 of your payment is applied to interest, then the $125 is considered unearned interest; the lender cannot count it as income or earned interest until the last day of the month. How Unearned Interest Works When a lender collects payment at the beginning of the month, it includes both a portion of the principal balance and a prepayment of interest....

What Happens After the Judgment Is Entered? A judgment can turn an otherwise uncollectible old credit account into a collectible amount of money. For instance, a statute of limitations may prevent a creditor from collecting funds you owe them, after a set number of years. But that same creditor may initiate a lawsuit against you—hoping that you’ll ignore it—thus allowing them to receive a default judgment against you. Had you shown up in court, the statute of limitations would have guaranteed your win....

“It’s a natural emotional reaction to get scared, almost like you’re getting pulled over,” Leslie Tayne, founder and debt relief attorney at Tayne Law Group, P.C., told The Balance. However, “the first step is not to panic.” Learn how to take control of the conversation and steer it toward the best outcome for your finances. Know Your Rights as a Debtor As someone with debt, you have a significant amount of protection from federal laws such as the Fair Debt Collection Practices Act (FDCPA), which regulates debt collection activities....

If you take the process one step at a time, you should be able to avoid financial disaster—even if your looming car payments look like an insurmountable problem. The Trouble With Missed Payments Skipping your car payments can snowball into multiple problems. Late payments or non-payments will be reported to the credit bureaus, which will severely impact your credit score. The most important factor in your credit score is your payment history, so any negative marks will have a significant impact....

Or maybe you’re moving to a new state, but your policy at the moment is from a great but local car insurance agency in your current state. Maybe you’re a new empty-nester and are getting rid of your two large SUVs in favor of an electric car. Maybe you’ve simply found a better deal with a different carrier and want to make the switch. There are all sorts of reasons to change your auto insurance, but changing your car insurance always boils down to one of two things: a change in your life circumstances or the desire to save money....

What Is a Coverdell ESA? A Coverdell ESA allows up to $2,000 per child per year in after-tax contributions to be made in a child’s name. These non-deductible contributions must be made in cash, but they’ll grow through tax deferment. Non-qualified withdrawals might be taxed, while money withdrawn for qualified educational expenses won’t be taxed. The beneficiary pays the tax. This benefit applies not only to qualified higher education expenses, but also to qualified elementary and secondary education expenses....

What is Form W-9? Form W-9 is a tax document that must be signed by independent contractors to provide a taxpayer ID number (Social Security Number or Employer ID). If the employer doesn’t have a taxpayer ID, or if the taxpayer ID is incorrect, the independent contractor must have federal income taxes withheld, known as “backup withholding.” Form W-9 is a standard tax document often utilized in business and financial transactions....

Standard Policy Most insurers that provide commercial auto coverage utilize standard policy forms published by the Insurance Services Office Inc.(ISO). The ISO provides statistical loss data to insurance providers as well as standardized policies and other forms. The backbone of the ISO Business Auto Policy is the Business Auto Coverage Form. This form contains key parts of the policy, including the coverages—liability and physical damage—exclusions, conditions, and definitions. Three Categories of Insureds Section II of the Business Auto Coverage Form outlines the persons or entities that qualify as insureds under commercial auto liability coverage....

Qualifications Hedge fund investors are required to have at least $1 million in net worth or must have earned income above $200,000 in each of the two preceding years. They also must reasonably expect to earn that amount for the current year. They need this cushion to weather significant downturns in their portfolio in their quest for higher returns. They also must be able to keep their money tied up for the three or more months, as may be required by hedge funds....

What Is a Business Valuation? A business valuation is a process of setting the value of a business for several different purposes. A business might be valued before it is sold, or to determine the value before or after a disaster impacts it, or before going public. Why Does Your Business Need a Valuation? There are a lot of reasons your business needs a valuation. Several are listed below, and there be others that we’re not even aware of yet:...

There are a few explanations for this, and it’s all based on how credit reporting works. The Account Was Too Old to Be Reported The account you’re looking for may have dropped off your credit report. This could happen either because the credit reporting time limit passed, or the credit bureau’s internal reporting time limit for that type of account expired. Accounts closed in poor standing—for example, if you were delinquent when the account was closed—will fall off your credit report after seven years....

If you’re about to begin a job search, you should expect to have your references checked. The references you provide to employers may be contacted about your employment history, qualifications, and the skills that qualify you for the job. In addition, many organizations check with previous employers to get information on your work history and ability to perform on the job. When Employers Check References The days when employers ignored references or did not think they were important are long gone....

Tim Robberts / Getty Images The term “security” now refers to just about any negotiable financial instrument, such as a stock, bond, options contract, or share of a mutual fund. Securities fall into three broad groups: debt, equity, or derivative. Debt Securities A business will first borrow using a traditional means, such as from a bank, when it needs money to grow. Banks don’t want to take too much risk, so they will only lend so much....

The truth is that most campaigns fail. They fail to hit their financial targets. In fact, Kickstarter’s success rate sits around 37%. That means just about 1 out of every 3 projects actually succeeds at crowdfunding. The rest lose. While it takes a lot of work and some strokes of luck to win at crowdfunding, there are some misunderstandings about how crowdfunding works. Learn how to avoid these pitfalls on your way to crowdfunding success....

There are five resources you need upfront to start a business that has staying power. Business knowledge is one of course, but the other four are equally as important. To turn a startup venture into a successful business, you must be equipped to follow through as well as gain business-related knowledge and skills. Fully Commit Successful entrepreneurs are fully committed to their business ventures. You need to do the same....